Back to top of postYou can look at your heating system as merely a necessary household expense where you trade money for comfort. In a short term sense, that’s just what it is. Investing is looking at something long term. Consider what you do with your other savings. You invest it in something that earns you a return over time.
Popular investments include bank accounts, stocks, bonds, and real estate. Generally a car you use every day cannot be considered an investment because it loses it’s value. You own it for its utility, and if you take good care of it, you can sell it with some value left in it. Money in bank accounts is hardly an investment because the interest rate earned is close to zero. Real estate over time can be a good investment if it’s in a good area, but it is risky and when accounting for inflation, property taxes and maintenance, the returns are low. For homeowners, the best part of an investment in real estate is the utility gained from using it.
Stocks and bonds can be good long-term investments if the company is successful and earns good returns over time. Some stock market advice from the world’s greatest investor makes for a good analogy for someone investing in a heating system:
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
– Warren Buffett
But what about that “investment” in the heating system? How can it be looked at as an investment? After all, you do have to have a heating system, and its primary purpose is to keep the occupants of a building comfortable.
From an investment perspective, the question is what kind of heating system will cost you the least amount of money over 20 years. That is a lot longer than the 10 years in Warren Buffett’s example. Over time, the initial investment in a heating system is small compared to the amount of money that will be spent on fuel in its lifetime. So the answer is, the better investment is in a heating system is one that uses a lower cost fuel.
Wood pellets are not subjected to swings in the dollar, and they are not affected, or much less so to world events such as armed conflict in oil producing countries.
In short, if you’re in the market for a new heating system, you can speculate and lock in on a fuel for the next 20 years that has proven to be highly volatile. Or you can invest in a heating system that runs on lower cost, local fuel that has proven to be far less volatile, and that has always sold at a discount to fossil fuels.